Shares in Hargreaves Services (LSE: HSP) have slumped by over 17% today after the company released a disappointing set of half-year results. The fuel and bulk material logistics company reported a pre-tax profit of £800k for the six-month period, which is down from £15.2m last year, with challenging trading conditions being the key reason for the decline.
As a result, Hargreaves Services will reduce its exposure to the thermal coal market over the next couple of years, which it believes will generate improved cash flow from the unwinding of stock and plant positions. It will also continue to restructure and believes that while the short term will be challenging, the business has a relatively bright long-term future.
With Hargreaves Services expected to remain profitable during the short-to-medium term, its sustainability as a business doesn’t appear to be in doubt. However, with major changes afoot, declining profitability and reduced dividends, there may be better options in which to invest elsewhere.
Struggles ahead
Also struggling in recent months has been mobile payment solutions provider Monitise (LSE: MONI). It continues to struggle to turn a profit and this puts it in a much riskier position than Hargreaves Services. For example, it’s forecast to post a pre-tax loss of £27m in the current year and while this would represent an improvement on last year’s performance, it still leaves the company’s financial standing under increasing pressure.
Looking ahead, Monitise appears to be some way off generating a black bottom line. Although its product and idea is sound and has proved to be popular among major blue-chip customers, the investment community seems to be losing patience with the company’s profit outlook. This is evidenced by Monitise’s share price fall of 91% in the last year. Although it’s likely to still exist in a year, it seems prudent to avoid buying Monitise until it’s in an improved position regarding profitability.
Ch-ch-ch-changes
Meanwhile, online advertising company Blinkx (LSE: BLNX) is also struggling to turn a red bottom line into a black one as it transforms itself. Its recent update showed that losses in the first six months rose to $79m from $11m in the comparable period from the previous year. However, this included a $60m non-cash exceptional charge for exiting certain non-core businesses which, alongside a $1m restructuring programme, are gradually changing Blinkx’s business model and focus.
While the company has considerable potential to deliver improved financial performance, it appears to be a stock to watch rather than buy at the present time. Owing to its relatively large cash pile and sound balance sheet, Blinkx is very likely to still exist in one year. However until it’s profitable, investor sentiment may remain weak and cause its share price to come under further pressure following its 30% fall in the last year.
